Olli - "Continued execution"
An earning update on Ollie Bargain Outlet Q1FY25
Dear readers,
It’s time for another earnings update for Ollie's Bargain Outlet (OLLI) for Q1FY25. (FYI": This will be the only stock i cover quarterly) In my last post, we discussed management’s plan to aggressively expand.
This quarter, we see that plan shift from ambition to action, and the results speak for themselves. Ollie’s continues to prove why its unique model is built to thrive in a chaotic retail environment.
Disclosure: I have interest in this company. Click below to read the previous update.
Let’s dive into the company results!
Big Picture
The theme this quarter is execution. Ollie’s is not just talking about growth; it’s delivering it at a record pace while its competitors falter. The company is masterfully turning widespread retail disruption into a powerful tailwind for both store expansion and inventory acquisition.
This acceleration is happening for a reason. The environment is ripe with opportunity, and Ollie’s is one of the few players with the operational flexibility and financial strength to seize it. Van der Valk highlighted this unique position:
“The significant number of retail store closures and supply chain disruptions have created a tremendous amount of access to inventory… This gives us ultimate flexibility when it comes to navigating a choppy environment, and puts us in a very strong position versus most retailers.”
Ollie’s is not just surviving the retail apocalypse; it’s feasting on the spoils. With a strong balance sheet and a proven model, they are solidifying their role as the go-to partner for vendors needing to move excess goods.
Financial Performance
Q1 and Fiscal 2025 Performance:
Comparable store sales grew 2.6%, driven by a strong increase in customer transactions.
Net sales increased 13% to $577 million, well ahead of expectations.
Adjusted net income was $46.1 mil (0.75 per share), beating forecasts.
Gross margin held flat at 41.1%, as lower supply chain costs were offset by merchandise mix.
SG&A expenses rose as a percentage of sales, primarily due to higher medical claims and costs related to the accelerated new store growth.
Ended the quarter with 584 stores, an increase of 13% year-over-year.
Sales growth
The acquisition of former Big Lots stores is proving to be a masterstroke. These "warm boxes" are outperforming, validating management's thesis that a built-in discount shopper base would lead to a faster ramp-up. As van der Valk noted:
“These stores are off to a very strong start. We appear to be benefiting from the fact that these are warm boxes with a built-in discount shopper customer base, which was our hypothesis going in.”
This successful integration has de-risked their accelerated growth plan and gives me confidence in their pipeline. In fact, management hinted at another "above algo year in '26 in terms of real estate," suggesting this pace may be the new normal for the medium term.
As CEO Eric van der Valk confirmed, the strategy is paying off immediately:
“We opened 25 new stores in the first quarter, a record for any period in our history… The team has done an excellent job prioritizing these openings in 2025, while advancing our pipeline for 2026 and beyond.”
Same Store Sales Growth
While the new stores are the headline, the performance of the existing base is equally impressive. The 2.6% comp growth is solid, but the underlying data is even more telling. Management quantified both the headwind and tailwind from the Big Lots closures:
The Headwind: Liquidations at closing Big Lots stores created a minor drag of about 25 basis points on the total company comp during Q1.
The Tailwind: More importantly, existing Ollie’s stores near a previously closed Big Lots are seeing a sustained low-to-mid-single-digit sales lift.
This confirms that Ollie’s is successfully capturing displaced customers and market share, a trend that should continue to benefit same-store sales for quarters to come.
Enhanced Loyalty: The Ollie’s Army Focus
Perhaps the most exciting strategic update is the doubling down on their loyalty program, "Ollie's Army," which already accounts for over 80% of sales. To further strengthen this moat, they announced two key enhancements:
A new exclusive shopping night in June for members, mirroring their highly successful December event.
The "Ollie's Days" promotion will now be exclusive to Ollie's Army members.
As van der Valk explained, this is about rewarding their best customers and making the program stickier:
“We are constantly looking for ways to better serve our Ollie's Army members… Members will now have 2 special nights each year to shop and save.”
This is a smart, low-cost way to drive loyalty and create a feeling of exclusivity that mass-market retailers can't replicate.
Profitability
Ollie’s gross margin remained strong at 41.1%, reaffirming its long-term target of 40%. The company’s discipline here remains a cornerstone of my thesis. They continue to use any excess margin to reinvest in lower prices for the customer, which drives traffic and deepens loyalty. This philosophy protects their value proposition and is exactly what I want to see from management.
Inventory & Deal Flow
The closeout pipeline is the engine of Ollie's, and right now, that engine is firing on all cylinders. The deal flow is so strong that management noted they’ve “had to hold our buyers back.” Crucially, this isn't just about more inventory; it’s about gaining access to strategic product lines previously locked up by a fragmented field of competitors.
Management highlighted that they are now seeing product pipelines from the exits of major players like Big Lots, but also from smaller, specialized chains. As the CEO pointed out, even the bankruptcy of a company like Bargain Hunt, which he noted had a "pretty meaningful pipeline of consumable goods" is freeing up valuable CPG inventory for Ollie's.
Gaining access to the supply chains of these fallen rivals is a significant, long-term advantage, ensuring a fresh and compelling 'treasure hunt' experience for shoppers.
Balance Sheet
The balance sheet is as pristine as ever, with $415 million in cash and investments and no meaningful long-term debt. This financial fortress gives them the firepower to remain opportunistic on both real estate and inventory deals, a critical advantage in the current environment. The company continues to buyback albeit at slower pace, it is still highly encourage.
Tariff
Tariffs are creating retail uncertainty, but Ollie’s remains well-positioned. Management has already baked the impact into their 40% full-year gross margin target. Direct imports from China now make up just ~10% of their mix (down from 15%), and their closeout model gives them unmatched flexibility, they buy only when deals make sense. If tariffs hurt one deal, they simply move on to the next. This agility helps protect margins and reinforces their “Good Stuff Cheap” value promise.
Conclusion
This was a fantastic quarter that demonstrated Ollie's ability to execute on an ambitious strategy. The renewed focus on enhancing the Ollie's Army loyalty program further widens their competitive moat. My bet on their dominance in the closeout space feels stronger than ever.
That said, the market has taken notice, and the stock's valuation reflects much of this good news. I remain a confident holder, believing Ollie's is well-positioned to compound value for years to come as they continue their march toward 1,000+ stores.
Resources: Ollie's (NASDAQ:OLLI) Surprises With Q1 Sales by stockstory
Disclaimer: I have position in the company mentioned and receive no fees for writing the post. I am not affiliated or have any role with the company. This post is just for educational purpose and it is not an advice to buy or sell the stocks. Invest at your own discretion.